Aviation Department FY 2009 Strategic Operating Plan I. Executive Summary

Aviation Department Strategic Operating Plan FY09 Aviation Department FY 2009 Strategic Operating Plan

I. Executive Summary

Introduction Charlotte Douglas International Airport is the largest airport between Philadelphia and Atlanta. It is served by seven major airlines, American, Continental, Delta, Midwest Airlines, Northwest, United and US Airways; two foreign flag carriers, Air Canada Jazz and Lufthansa German Airlines; and 14 regional carriers, America Eagle, American Connection operated by Trans State Airlines, Continental Express, Delta Connection operated by Atlantic Southeast Airlines, ComAir, Freedom and Shuttle America, Northwest JetLink operated by Pinnacle Airlines, United Express operated by Mesa Airlines and Shuttle America and US Airways Express operated by Air Midwest, Chautauqua Airlines, Mesa Airlines, Piedmont Airlines, and Republic Airlines. It is also served by low fare airlines, Air Tran and Jet Blue.

The Airport serves as the largest passenger hub for US Airways. Passenger traffic at the Airport grew from 2.9 million enplanements in 1982 when the current passenger terminal opened, to over 15.5 million domestic and 1 million international enplanements in 2007. Currently, the passenger airlines operate over 600 flights per day to 123 non-stop destinations in the United States, Canada, Mexico, Europe and the Caribbean. By virtue of the Airport and the passenger airlines that serve it, citizens of the Charlotte Region have access to one-stop service to most anywhere in the United States.

The airport is also home to significant military, cargo and corporate aviation operations. Many of the corporate aircraft are stored and maintained at one of the 15 corporate aviation facilities on the Airport. The remaining corporate and private aircraft are accommodated by the fixed based operator, Wilson Air Center, which operates this facility on behalf of the airport. The Charlotte Air Cargo Center is home to more than 20 operators and supports the center of the Carolina’s air cargo operations. The NC Air National Guard and NC National Guard both have facilities on airport premises.

The Airport is operated financially on a fully self-sustaining basis – no general fund revenues have been or are appropriated to the cost of facilities or operations. Rather, Airport revenues defray all capital and operating costs, including the cost of City furnished services.

Summary of needs

FY2006 Actual FY2007 Actual FY2008 Actual FY 2009 Request Budget $122,176,895 $136,060,640 $139,980,590 $162,189,637 Positions 268 268 268 268

Vision We will serve as an economic engine of the Carolinas, facilitating the movement of people and goods, creating jobs and enterprise and sustaining a higher quality of life.

Mission We will be the preferred transportation center and airline hub by providing the highest quality product for the lowest possible cost.

Key Issues and Challenges

In the past year, the airline industry has tumbled to an economic low point, operating far beyond the point that experts previously deemed viable. Prior to FY08 we were concerned about the proposed merger of US Airways and Delta. That merger is off the table and since that time Delta has talked with Northwest (yet to be determined) and US Airways entered into discussions with United (not moving forward). Due to the state of the economy, the airlines are hemorrhaging. Fuel costs have doubled. Bankruptcies are looming. Consolidations are being proposed for sheer survival.

There is no certainty in our environment. The traditional airline business model is changing on a daily basis, by the minute. Maintaining and improving the customer experience, in a time of decreased airline services, is a huge challenge and will continue to be in the forefront for the coming year. This is a time when the airline model that we know is evolving into something very different, not only because of circumstance but out of necessity. Previous services provided by the airline are changing, with some of them going away. This past year we spent a lot of time discussing how we “pick up the slack” from the airlines and how do we make facility and operational changes to accommodate these changes. It is unclear all of the future impacts that the airport will experience due to this.

The state of the economy and the unpredictable airline industry is causing us to approach all financial decisions cautiously. The financial markets are in disarray with interest rates on our existing debt increasing rapidly, in turn raising questions about our ability to sell additional debt. These are trying times and we must proceed carefully.

Like most other businesses, the economic downturn is impacting our daily operation. Our costs are increasing and we are forced to determine what services are critical. The most prominent cost increase is fuel costs. We operate a significant busing operation - 48 shuttles for our parking operation. In FY08 our fuel costs were $1.1 million, which were twice the FY07 costs. We have implemented fuel conservation efforts and operational changes throughout our entire fleet, in an effort to make up some of the cost increases.

Last calendar year, we experienced a significant passenger increase – 12%. To date, we are trending at 5% for the year. Construction is underway or about to be started on several significant construction projects – new runway, new parking deck and consolidated rental car

3 facility. All of these are progressing, based on previous demands, without complete certainty of future demands.

It is impossible to predict what the economy will look like a year from now. We will watch every financial decision closely in order to guarantee the Airport’s financial security. We will continue to look for additional revenue streams and create business practices that allow us to make the most of our finances.

4 Organizational Chart

Revised 02/2007

Airport Administration

Operations Development Administration Facilities & Finance

Engineering/ Airport Police Accounting Building Construction Maintenance Airport Operations Human Resources Environmental Field Maintenance Parking Contract Planning Administration Vehicle Noise and Land Maintenance Property Acquisition Management Janitorial Maintenance Information Technology

II. Strategy and KBU Planning Recent Accomplishments

• Increase in all three bond ratings • Lead the industry in operating cost per passenger to airlines • Decrease of more than ??? in airline ticket costs • Expansion of parking facilities, including a state of the art deck

Links to Corporate Strategy

Serve the Safeguard the Provide Promote Environment Transportation Economic Customer Choices Opportunity

Run the Enhance Develop Optimize Customer Collaborative Business Business Service Solutions Practices

Manage Expand Tax Maintain Resources Base and Bond Rating Revenues

Develop Achieve Recruit and Promote Employees Positive Retain a Skilled, Learning and Employee Diverse Growth Climate Workforce

6 Links to Corporate Strategy

Serve the Customer Each day at the Airport, there are more than 600 aircraft departures and approximately 90,000 people passing through the terminal. Additionally, there are cargo operations, military operations (with on-site facilities for the North Carolina Air National Guard and North Carolina National Guard), corporate aviation operations, general aviation and trucking facilities. The Airport has a passenger terminal, which is over 1.7 million square feet of space, 500,000 square feet of cargo facilities and 23,500 public and employee parking spaces. With nearly 67 percent of North Carolina’s air travelers flying in and out of Charlotte Douglas, the facility is the premier transportation center of the Carolinas.

Run the Business Charlotte Douglas is one of the nation’s busiest airfields with an average of 522,000 operations annually, and a Level 5 air traffic control facility that tracks over 100 flights per hour. The technologically advanced airfield consists of three runways and can handle all types of aircraft. The day-to-day operation is focused on delivery of the highest quality product for the lowest possible cost to all customers – internal and external. Supplying airport customers with a quality, state-of-the-art facility while meeting all safety and security requirements is fundamental to all functions. The organization is always looking to the future to insure we are on the leading edge of our industry. Infrastructure enhancements, technological advancements and capital improvements are tools used to put Charlotte Douglas in the top tier of the country’s airports.

Manage Resources The Airport is an enterprise fund and uses no local tax dollars. We have a pro-business attitude and provide an infrastructure platform for the private sector. We pride ourselves on exceptional bond ratings and our ability to maintain those in a tumultuous industry. The Airport’s financial self-sufficiency is a benefit to the community and is often modeled throughout the country. Additionally, the efficient operating philosophy practiced by the airport produces some of the lowest operating costs to airlines in the country. Charlotte Douglas is recognized as an economic engine of the Carolinas and contributes $10 billion to the local economy annually while employing 100,000 people.

Develop employees The Aviation Department employs 268 in varying positions including skilled crafts, technical and general labor, office personnel, law enforcement, administrative and professional classifications. Investing resources (financial and otherwise), training and development opportunities, and team building experiences in employees is important to the success of organization. A communications program, including a bi-monthly newsletter and quarterly employee meetings, contribute to successful employee communication and interaction.

7 Strategic Initiatives

Provide Transportation Choices • Design and construct state-of-the art airport facilities to meet the demands of all areas of the airport operation.

Promote Economic Opportunity • To enhance cargo operations, develop Airport and contiguous areas into an intermodal facility that connects air, sea, highway and rail.*

Enhance Customer Service • Provide public parking capacity and convenient parking services.

Maintain Bond Rating • Maintain status as an airport in the A Category

Expand Revenues • Maintain financial self-sufficiency of the Airport without use of General Fund revenues.

*Focus Area Plan Initiative

8 III. Service Delivery

Core Service Areas

Operations: Includes Airport Parking including Ground Transportation, Airport Police and Airport Operations

BSC Links: Safeguard the Environment, Enhance Customer Service, Optimize Business Practices, Expand Revenues, Achieve Positive Employee Climate, Recruit and Retain a Skilled, Diverse Workforce, Promote Learning and Growth

Development: Includes Engineering/Construction, Environmental, Planning, Noise & Land Acquisition

BSC Link: Provide Transportation Choices, Promote Economic Opportunity, Enhance Customer Service, Optimize Business Practices, Expand Revenues, Achieve Positive Employee Climate, Recruit and Retain a Skilled, Diverse Workforce, Promote Learning and Growth

Administration & Finance: Includes Accounting, Human Resources, Contract Administration, Property Management, Information Technology

BSC Link: Enhance Customer Service, Maintain Bond Rating, Optimize Business Practices, Expand Revenues, Achieve Positive Employee Climate, Recruit & Retain Skilled Diverse Workforce, Promote Learning & Growth

Facilities and Maintenance: Includes Building Maintenance, Field Maintenance, Vehicle Maintenance, Janitorial Maintenance

BSC Link: Safeguard the Environment, Enhance Customer Service, Develop Collaborative Solutions, Optimize Business Practices, Achieve Positive Employee Climate, Recruit & Retain Skilled Diverse Workforce, Promote Learning & Growth

9 Service History and Trends

Aircraft Activity Calendar Years 1997-2007

600,000

500,000

400,000

Military 300,000 General Aviation Air Taxi Air Carrier

200,000

100,000

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

10 Domesticand International Passenger Activity Calendar Years 1997-2007

35,000,000

30,000,000

25,000,000

20,000,000 International Deplanements International Enplanements Domestic Deplanements 15,000,000 Domestic Enplanements

10,000,000

5,000,000

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

11 Concession Revenues Per Enplaned Passenger Fiscal Year 2001-2007

$4.94 $5.00 $4.55 $4.50 $4.30

$4.00 $3.66 $3.65 $3.52 $3.50 $3.32

$3.00 $2.67 Food & Beverage Per $2.40 Enplaned Passenger $2.50 $2.19 News & Gift Per Enplaned Passenger $1.94 $2.03 $1.99 $2.00 $1.83

$1.50

$1.00

$0.50

$- 2001 2002 2003 2004 2005 2006 2007

IV. BSC and Performance Measurement (ATTACHMENT A)

V. Request for Resources

Base Budget: Aviation requests a base operating budget allocation of $139,980,590 with 268 positions for FY2008. The FY2009 is $162,189,637 with no change in positions. The Passenger Facility Charge Fund budget is $26,728,560 for FY2009

Change to Current Level: There are not changes to the current level budget outside of normal operating increases, such as salaries.

Service Level Changes: There are no service level changes in FY2008 and FY 2009.

Revenues: The airport is completely self-supporting. Revenues come from user fees, rents received from tenants and sales of goods and services to passengers. The user fees are updated annually based upon the projected costs of operating the Airport for the next year. Rents and prices for goods sold are based upon market rates.

CIP Support: The anticipated capital budget for FY2009 is $246,678,882. The source for these funds will be federal funds, North Carolina Department of Transportation, bond proceeds and passenger facility charges.

13 KBU-Balanced Scorecard Report Reporting Period: to

KBU Initiative Measure Prior Lead Performance Data Comments/Explanation Corporate Objective (To be completed at mid-year and year-end reporting)) (* indicates Focus Area ($ indicates incentive Year or Lag YTD Status Initiative) pay measure) Actual Target

C1. Provide Design and construct Design and build N/A Lead Complete Wallace Transportation Choices state-of-the-art airport roads to facilitate Neel Road facilities to meet the access. relocation by demands of all areas of September 2008. the airport operation. Lead Provide terminal and N/A Begin construction airfield facilities to of taxiway bridges meet demand. for the new runway by September 2008.

Lead N/A Begin NAVAID installation for the new runway by October 2008.

Lead N/A Begin baggage claim renovations with the construction of a new Welcome Center and

Serve the Customer renovated baggage service offices by January 2009.

Lead Provide corporate N/A Begin construction aviation facilities to of an additional meet demand. corporate storage hangar by June 2009.

* in KBU initiative column indicates Focus Area initiative $ indicates incentive pay measure KBU-Balanced Scorecard Report Reporting Period: to

Lead C2. Safeguard the Operate the airport for Implement N/A Meet the Environment long-term sustainability. environmentally documentation friendly business requirements of practices. the North Carolina Solar Center Grant for two hybrid shuttle buses. Establish cost/revenue analysis for recyclable materials by measuring amounts recycled, deferred costs and revenues generated. Begin the process of Obtain LEED becoming a certification for Leadership in Energy designated staff and Environmental member by March Design (LEED) 2009. certified facility. Lead C3. Promote Economic To enhance cargo Create rail/yard facility N/A Obtain federal Opportunity operations, develop on-site at the airport to approvals for the Airport and contiguous meet the demands of rail yard from the areas into an intermodal potential users. FAA and the facility that connects air, FHWA by May STRETCH GOAL sea, highway and rail. 2009. Lead B1. Enhance Customer Enhance passenger Benchmark and N/A Begin surveying of Service experience within the evaluate services passengers with terminal. provided to ensure a Phoenix superior travel Marketing by experience. August 2008.

Lead Interact with the Conduct a 12 Conduct monthly community. comprehensive meetings with the community relations Airport Advisory Run the Business program that includes Committee and standing committees, subcommittees as publications and required. outreach initiatives.

* in KBU initiative column indicates Focus Area initiative $ indicates incentive pay measure KBU-Balanced Scorecard Report Reporting Period: to

Lag Promote business Goal Achieve Goals have not been set yet. opportunities at the met DBE/SBE/ACDBE airport. goals.

Lead Provide public parking Develop ample N/A Begin construction capacity and convenient parking capacity and of Business Valet parking services. introduce modern, Parking deck by efficient services at September 2008. competitive rates. Investigate modern N/A Lead Pending issuance and customer service of General Airport enhancing parking Revenue Bonds in payment systems that October 2008, improve service and begin reduce operating implementation of costs. a new revenue control system for public parking. B2. Develop Operate the Airport in Maintain Part 139 2 Lag Receive a zero Collaborative Solutions compliance with federal Operating Certificate defects annual aviation regulations. inspection.

B3. Optimize Business Modernize existing Provide accurate flight N/A Lead Update RIDs, Practices processes with and baggage FIDs and BIDs for technological information for the airlines and advancements to improve customers. passengers. service and reduce Identify system operating costs. and funding by April 2009.

Provide Complete fiber computer/network optic backbone access to off-site installation by facilities and services. December 2008 to connect Aviation Department offices and services.

* in KBU initiative column indicates Focus Area initiative $ indicates incentive pay measure KBU-Balanced Scorecard Report Reporting Period: to

Accurately recover N/A Lead Waiting on WAM. costs for services provided and materials used.

R1. Maintain AAA Maintain status as an Maintain airport bond Increa Lead Successfully . Rating airport in the A Category. ratings. se to conduct A2 by presentations and Moody research to bond ’s rating agencies as required. R2. Expand Revenues Maintain financial self- Meet debt service Met Lag Generate debt sufficiency of the Airport coverage covenant in service coverage without use of General City’s revenue bond of 1.25 (125%) or Fund revenues. order. greater.

Manage Resources Manage Resources Lag Increase Maximize the revenue Increase terminal 11% per passenger through concession revenues. food/beverage/ new and alternative retail revenues revenue sources. per passenger by 3%. Lag E1. Achieve Positive Enhance employee Develop and promote N/A Increase Employee Climate quality of life. healthy living participation in programs and Wellness Works initiatives. Challenges to 12% of regular status employees. $ Conduct a Nutrition 101 class with 50% participation of regular status

Develop Employees Develop Employees employees. $ Promote a safety Minimize recordable 3.6% Lag Maintain conscious workplace. OSHA injuries through recordable OSHA education and injuries to less awareness programs. than 5% of the workforce. $

* in KBU initiative column indicates Focus Area initiative $ indicates incentive pay measure KBU-Balanced Scorecard Report Reporting Period: to

Facilitate information to Conduct an internal 4 Lead Conduct quarterly employees through employee business routine communication. communications effort meetings for all that includes routine employees with a meetings and 50% participation publications. rate of regular status employees. $ 24 Lead Publish Airport Update newsletter every two weeks. E2. Recruit & Retain Recognize employees Conduct employee Met Lead Conduct annual Skilled Diverse appreciation employee Workforce opportunities. celebration, at which time peer- nominated employee awards are presented. E3. Promote Learning & Provide employee Make various on-site 20 Lag Provide each Growth education and training and off-site training employee with an opportunities. opportunities available average of eight for all types of jobs. hours training. $

Status: 1. Use a “+” (plus) sign to indicate all is well. 2. Use a “-“ (minus) sign to indicate that the status is not where expected or the current status is in trouble. Provide explanation. 3. Use a “x” to indicate this target will not or is not met. Provide explanation.

* in KBU initiative column indicates Focus Area initiative $ indicates incentive pay measure